New Delhi: The Union Budget 2026-27 rolled out a clutch of direct tax reforms aimed at improving “ease of living” for taxpayers, including tax exemption on interest awarded by Motor Accident Claims Tribunals, lower tax collected at source (TCS) rates on overseas remittances, and a simpler, automated process for small taxpayers to obtain lower or nil TDS certificates. Announcing the measures in Parliament, Finance Minister Nirmala Sitharaman said the proposals seek to reduce compliance burden while improving clarity and certainty in the tax system.
Under the proposals, any interest awarded by the Motor Accident Claims Tribunal to a natural person will be exempt from income tax and no TDS will be deducted on such payments.
The Budget also proposes to cut TCS on overseas tour packages to 2% from the current higher slabs, and similarly reduce TCS to 2% for education and medical remittances under the Liberalised Remittance Scheme. To remove ambiguity, supply of manpower services will be specifically brought under the ambit of payments to contractors for TDS purposes, attracting a 1% or 2% deduction rate.
For small taxpayers, the Budget introduces a rule-based, automated scheme to obtain lower or nil TDS certificates without approaching the assessing officer, and allows depositories to collect Form 15G/15H and pass it on to multiple companies, easing paperwork for investors holding securities across firms.
The time limit for revising income tax returns has also been extended from December 31 to March 31, subject to payment of a nominal fee, while timelines for filing returns will be staggered across categories of taxpayers.
In a significant compliance relief, the Budget also proposes a one-time six-month foreign asset disclosure scheme for small taxpayers such as students, young professionals and relocated NRIs.
The scheme offers immunity from prosecution—and in some cases penalties—on payment of specified tax or a fixed fee, depending on whether the taxpayer failed to disclose overseas income or only missed declaring the asset, with thresholds of ₹1 crore and ₹5 crore respectively for the two categories.